One of the most detrimental mistakes businesses make when planning their budgets is assuming they don’t qualify for valuable tax credits such as the WOTC employment incentive, R&D credits or green building incentives.
These tax solutions offer you the opportunity to increase tax savings when your company submits for credits you are eligible to claim. Make sure you understand what qualifies your business for corporate tax incentives by learning about common tax credit misconceptions:
1. Individuals Who Qualify For The WOTC Are Not Capable Of Working For My Company
It is certainly not advisable to hire employees entirely for the purpose of capturing tax credits. If an individual is not able to complete work-related tasks without assistance, tax credits don’t make up for a job that goes unfinished.
However, hiring individuals who are eligible for employment incentives but who are also valuable additions to your team is a beneficial way to increase tax savings. Many potential employees who are veterans or live in economically disadvantaged neighborhoods have the work skills to excel in a career at your company.2. My Business Is Too Small To Qualify For Corporate Tax Incentives
It is easy to assume that only large companies stand to gain significant tax savings from corporate tax incentives, but small- to medium-sized businesses also benefit from pursuing tax credits like the WOTC, R&D credits and green building incentives.
In fact, companies that have smaller budgets sometimes see more impactful savings than large businesses with more significant expenses, especially if they have not claimed credits in the past.
Companies of all sizes benefit from savings when claiming tax credits. For example, a large hotel management company that hires 10,000 employees a year may generate close to $800,000 in WOTC. Additionally, a janitorial company with 2,500 hires earns $235,000 in tax credits.
3. We Haven’t Claimed Tax Credits Before, So We Missed The Opportunity
In the past, businesses that didn’t elect the Alternative Simplified R&D Credit (ASC) on an original return were prohibited from submitting for this credit and conversely were forced to claim the regular R&D credit on an amended return. The problem with the regular credit method is the base amount may be too great for companies to receive a full credit benefit or, in some cases, any credit at all. With this new rule, the opportunity now exists to retroactively elect ASC allowing many companies to receive a greater R&D credit benefit with this markedly simpler approach than by relying on the traditional regular credit methodology.
4. The R&D Tax Credit Is Only For Companies That Invent Something New
The assumption that you must invent something new in order to qualify for R&D credits prevents many eligible businesses from pursuing beneficial tax solutions.
Companies that improve or modify an existing product or process most typically use the R&D tax credit. Computer software, architecture and engineering businesses are examples of promising candidates for claiming R&D tax rewards.
However, you shouldn’t let preconceptions about what businesses qualify discourage you from researching R&D tax credits. If misconceptions about your eligibility for tax rewards are preventing you from claiming valuable credits, speaking with an advisor at a tax service is a beneficial way to ensure you’re not missing out on tax savings.
There are a number of resources and tools to help you discover tax incentives like the WOTC, green building incentives and R&D incentives for which your business qualifies. It is beneficial to continue to research tax solutions that benefit your company.
Take the next step towards discovering how to maximize your tax savings. Learn whether your business is eligible to capture R&D credits by taking a free quiz.
